No Blackstone Unturned: Private Equity Firm Acquires St. Modwen​


By Adelina Budulan​

The Story

UK-based real estate developer St. Modwen has accepted an increased takeover offer from Blackstone (The Guardian). In a rare move, the private equity giant decided to increase its bid after some shareholders voiced publicly that its initial offer was too low (Financial Times). The new all-cash offer values St. Modwen at £1.27 billion (Financial Times). It represents yet another instalment in the ongoing “acquisition frenzy of UK companies by [private equity] firms”, following the takeovers of fellow FTSE 250 constituents John Laing, Aggreko, and UDG Healthcare (Financial Times).

What It Means For Businesses And Law Firms

Private equity firms are swooping up British companies at the fastest pace since 2007, with 113 deals with a combined value of £23.3 billion announced this year (The Guardian). With more than $1 trillion in dry powder (cash reserves), private equity firms are scrambling to get their hands on new investments (Bloomberg). The UK market appears to be the ideal place; it finds itself “at a persistent discount to G20 peers” due to the chaos unleashed by the 2016 Brexit vote, and the tumultuous progression of the Covid-19 pandemic (Financial Times). All-time low interest rates are the cherry on top, given private equity firms’ inclination towards financing their acquisitions with debt (Reuters).

As British companies struggle with the socio-economic status quo, the likes of Blackstone will probably continue their shopping spree well into the foreseeable future. In turn, law firms with public and private M&A expertise will reap the benefits - especially if they are well-versed on the inner workings of the private equity industry. Kirkland & Ellis is advising Blackstone on this particular acquisition, while Slaughter and May is advising St. Modwen (Law360). Designated teams within the firms’ respective corporate practices likely coordinated the deal, which may have involved tasks such as liaising with specialist practice areas, conducting due diligence, negotiating terms, and drafting the necessary documentation. Additionally, since St. Modwen is a public company, the deal will be governed by the UK Takeover Code.

As of present, a campaign for greater regulation against private equity has been tricky, in part because the government appears to favour investments that may help struggling businesses get back on their feet (The Guardian). Nevertheless, it has been argued that private equity’s focus on short-term returns is driving British business into the ground because it entails making redundancies, selling off assets, and amassing large amounts of debt (The Daily Mail). It remains to be seen whether such a line of reasoning will serve as an impetus for regulatory intervention. If the general public becomes increasingly averse to the private equity enterprise, the case for regulation may be bolstered. In this scenario, law firms would likely be called upon to help private equity clients navigate a potential new regulatory landscape.

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